Tuesday, 29 May 2012

The
rich rule over the poor, and the borrower is servant to the lender.

In the charged pre-election atmosphere in
Greece, Christine Lagarde’s comments on Greek taxation have fallen like a bombshell
in the public media. They were published in an
interview with The Guardian, and hardly contribute to improving the
situation, no matter how correct she may be in essence about the need to crack
down on tax evasion. I repeat the text here: each reader can draw their own
conclusions as to what she meant to say, and what political response to her
comments is worth.

Nevertheless, while this might come as a surprise to
Greeks suffering under extreme austerity, some say Lagarde's approach to the
eurozone is less draconian than the IMF's traditional policy towards developing
world economies. Is it easier to impose harsh demands upon small economies, but
much harder to tell difficult truths to the big ones – particularly fellow
Europeans?

"No," she says firmly. "No, it's not
harder. No. Because it's the mission of the fund, and it's my job to say the
truth, whoever it is across the table. And I tell you something: it's
sometimes harder to tell the government of low-income countries, where people
live on $3,000, $4,000 or $5,000 per capita per year, to actually strengthen
the budget and reduce the deficit. Because I know what it means in terms of
welfare programmes and support for the poor. It has much bigger
ramifications."

So when she studies the Greek balance sheet and demands
measures she knows may mean women won't have access to a midwife when they give
birth, and patients won't get life-saving drugs, and the elderly will die alone
for lack of care – does she block all of that out and just look at the sums?

"No, I think more of the little kids from a school in
a little village in Niger who get teaching two hours a day, sharing one chair
for three of them, and who are very keen to get an education. I have them
in my mind all the time. Because I think they need even more help than the
people in Athens." She breaks off for a pointedly meaningful pause, before
leaning forward.

"Do you know what? As far as Athens is concerned, I
also think about all those people who are trying to escape tax all the time.
All these people in Greece who are trying to escape tax."

Even more than she thinks about all those now struggling
to survive without jobs or public services? "I think of them equally. And
I think they should also help themselves collectively." How? "By all
paying their tax. Yeah."

It sounds as if she's essentially saying to the Greeks and
others in Europe, you've had a nice time and now it's payback time.

"That's right." She nods calmly.
"Yeah."

And what about their children, who can't conceivably be
held responsible? "Well, hey, parents are responsible, right? So parents
have to pay their tax."

Tuesday, 22 May 2012

Former PASOK minister Akis Tsochatzopoulos
has, for whatever reasons, released his private papers to the media. Mr.
Tsochatzopoulos is in detention while legal proceedings are underway against
him for bribery and money laundering. The origins of this prosecution date back
to bribes on military contracts, and were originally revealed by German
prosecutors prosecuting the Siemens and Ferrostahl cases, but also by Greek
press investigations into real estate purchases by his wife.

A useful summary is available on his Wikipedia profile.
According to this, Mr. Tsochatzopoulos held a variety of critical ministerial
posts which have long been associated with large-scale public expenditure and
all the attendant corruption effects this gives rise to:

My intent with this post is not so much to
recount the allegations against Mr. Tsochatzopoulos, as to raise some questions for the future:

a.Is Mr. Tsochatzopoulos’ health
and safety in the Greek prison system assured? What steps are being taken to
guarantee this?

b.What judicial and financial resources
are being assigned to this case by the interim government, and what commitments
are being made by the leading political parties to ensure that these resources
will be continued after an election?

c.How is it that his papers have
been leaked, and what right does the entire journalistic community of Greece
have to reproduce and comment on them in the public domain? While I can
understand that this creates a momentum for prosecution, it also enables
potentially guilty parties to make preparations for their own defence (and
evasion), which is no doubt already underway.

d.Tracking down the money trail
will involve specialised support and intra-judicial cooperation, notably with
Cyprus. What steps are being taken for this to avoid the debacle of that seen
in the Vatopedi “investigation”, where Greek requests for information on the
beneficial ownership of Cypriot IBC companies were routinely stonewalled?

A final note: assuming this case is indeed
investigated and prosecuted to the fullest extent, it will most likely unveil
corruption involving not only the PASOK party system, but also major Greek and
foreign suppliers, including those of Germany, France, and the United States.

Should this be the case:

e.What steps will be taken to
lift parliamentary immunity and the statute of limitations on crimes committed
by individuals under previous governments?

f.What steps will be taken to
assure their safety, but also to assure that they will not flee the country, as
other key figures in corruption scandals have done?

In my opinion, the fair and "professional" prosecution and trial of Akis Tsochatzopoulos and his associates would be a
serious sign that Greece is finally serious about cracking down on high-level
political corruption.

This creates a serious burden of
professional practise and objectivity not only among the civil service and
justice system, but among the very political parties who have the most to lose
from such an investigation and prosecution.

Unfortunately, precisely for these reasons,
there may be few chances that a real investigation and prosecution is permitted
to take place. We should remember that, as with Menios Koutsogiorgas in 1991, the ultimate statute of limitations is determined by survival.

The Economist, in its May 19th issue, (Iran and nuclear weapons: stick
now, carrot later) ran a useful summary of diplomatic efforts and options
to get Iran to relinquish its nuclear research (weaponisation) programme.
According to The Economist, Iran’s new willingness to negotiate is apparently
due to the effect of economic sanctions as well as IAEA reporting:

Iran’s return to the
table in an apparently more constructive mood marks a sharp change. The latest
round of talks failed in January 2011, after Iran’s chief negotiator, Saeed
Jalili, set preconditions that other countries found unacceptable. But since
the end of 2011 pressure on the regime in Tehran has increased. The UN’s
nuclear watchdog, the International Atomic Energy Agency (IAEA), published a
damning report detailing its concerns over the “possible military dimensions”
of Iran’s nuclear programme.

International
sanctions have bitten hard—creating a “world of hurt” in President Barack Obama’s
words. America now penalises any foreign financial institutions doing business
with Iran’s central bank, the country’s main conduit for oil money, and the
European Union has imposed an embargo on Iranian oil, due to come into full
effect by July.

According to The Economist, based on IAEA and
other sources, Iran may already have sufficient nuclear material for one
nuclear bomb:

On all counts, Iran is now very close to
the nuclear threshold. It already has about 6,000kg of 3.5% LEU, enough to
produce about five bombs-worth of weapons-grade HEU. Using the four centrifuge
cascades at the new Fordow enrichment site, near the holy city of Qom, and 15
additional cascades at the main Natanz site (each has between 164 and 174
centrifuges), it has recently tripled production of 19.75% LEU to about 13kg a
month. It may now have a stockpile of 150kg—near to the 185kg needed to produce
the 15-20kg of HEU required for a moderately sophisticated implosion device
(although about twice that amount of 19.75% LEU would be needed for a first
bomb because of initial wastage).

The IAEA’s November report also
indicated that Iran had probably already tested a sophisticated detonation
system for an explosive device suitable for use as a ballistic-missile warhead
(albeit the tests are likely to have taken place before 2004, when the
weaponisation side of the programme was pursued more energetically than it is
today). Informed by the IAEA’s work and intelligence sources, estimates of
Iran’s potential timeline to nuclear weapons—if the country were to quit the
NPT and throw everything into its programme—vary between just a couple of
months for a single crude device and more than two years for an arsenal of
three or four nuclear-tipped, solid-fuelled ballistic missiles.

Unmentioned in this report is the military build-up which has been
occurring in the Middle East and Persian Gulf over the past 6 months. This
force increase is aimed both at Syria and Iran. In Syria, the force increase
is meant to both discourage the Syrian conflict from spilling over to
neighbouring regions, as well as to signal resolve towards the Syrian
government. Recent press reports, however, indicate that Western public opinion is now
being prepared to accept a force intervention in the name of protecting
chemical weapons stockpiles and intervening against Al Qaeda. The Syrian conflict has already spilled over into Lebanon and Turkey, as well as involving more distant allies and proxies such as Libya and Iran.

The planning, involving intelligence
and military officials from at least seven countries, includes detailed
arrangements for securing chemical arms with special operations troops in the
event that parts of Syria are seized by militants, the officials said. Western
and regional intelligence officials are increasingly concerned that Islamic extremists could attempt to seize control of whole towns
and districts if the country slides into
full-scale civil war.

An expert panel
monitoring U.N. sanctions on Iran has reported that Syria continues to be the
main destination of illicit Iranian weapons, a Security Council diplomat said
Wednesday. The diplomat, speaking
on condition of anonymity because the panel’s report has not been released,
said it identified three new illegal shipments, two involving Syria which was
also the previous destination of a majority of Iranian arms shipments.

These press reports come on the heels of
earlier reports that some 12,000 special forces troops from the United States
and other countries have deployed on a "military exercise" in Jordan. Agence France Presse reports that:

The United States and its allies have started in Jordan what was
described as the largest military exercises in the Middle East in 10 years,
focusing on "irregular warfare," top officers said on Tuesday.…Eager
Lion 2012 "is the largest exercise held in the region in the past ten
years," he said at the King Abdullah II Special Operations Training Centre
in north Amman. More than 12,000 soldiers are taking part in the war games,
representing 19 countries, including Bahrain, Egypt, Iraq, Jordan, Saudi
Arabia, Lebanon, Pakistan, Qatar, Britain, France, Italy, Spain and Australia.

In another set of reports, the press has been
focussing on the build-up of forces around Iran in the Persian Gulf, and Israeli
decision-making on whether or not to take military action.

On April 26th Aviation Week
reported (UAE-based
F22s a signal to Iran) that the US moved an F-22 wing to the Al Dafra Air
Base in the United Arab Emirates.

As tensions between Tehran, Washington and Tel Aviv continue to mount
over Iran’s pursuit of nuclear weapons technologies, the U.S. has quietly begun
a deployment of its premier stealthy fighter, the twin-engine F-22, to the
United Arab Emirates. Multiple Lockheed Martin aircraft will operate out of Al
Dhafra Air Base there, industry sources say. This is the same base from which
U.S. U-2s and Global Hawk UAVs have been launched since shortly after the 9/11
terrorist attacks.

The Los Angeles Times reported on January
12th (US
boosts its military presence in Persian Gulf) of the increase of US forces
in the Gulf region. These forces include troop contingents stationed there
after their withdrawal from Iraq, as well as naval forces which have been
transferred independently:

The Pentagon has
stationed nearly 15,000 troops in Kuwait, including a small contingent already
there. The new deployments include two Army infantry brigades and a helicopter
unit, a substantial increase in combat power after nearly a decade in which
Kuwait chiefly served as a staging area for supplies and personnel heading to
Iraq.

The Pentagon also has
decided to keep two aircraft carriers and their strike groups in the region.
This week, the American aircraft carrier Carl Vinson joined the aircraft
carrier John C. Stennis in the Arabian Sea, giving commanders major naval and
air assets in case Iran carries out its recent threats to close the Strait of
Hormuz, a strategic choke point in the Persian Gulf through which one-fifth of
the world's oil shipments passes.

As the deadline
for a decision draws nearer, the public pronouncements of Israel's top
officials and military have changed. After hawkish warnings about a possible
strike earlier this year, their language of late has been more guarded and clues
to their intentions more difficult to discern.

"The top
of the government has gone into lockdown," one official said. "Nobody
is saying anything publicly. That in itself tells you a lot about where things
stand."

This brief review of developments as
described in “mainstream” media remind one of previous campaigns to
prepare public opinion for war in the Persian Gulf. At this stage, it is difficult to understand whether the military build-up is there to be used, or as a
negotiating tactic to force a diplomatic outcome. This is no doubt a deliberate
tactic.

What remains to be seen, however, is how long
this armed stability will last. It is difficult to imagine that Iran, for
example, will risk a direct confrontation. On the other hand, it is difficult
to imagine Iran giving up a hypothetical nuclear weapons programme given the lessons
of the military interventions of the past 12 years (Afghanistan, Iraq, Libya).
The leopard, it is said, does not change its spots, and in this case there are
several leopards hunting in the same neighbourhood.

Sunday, 13 May 2012

The struggle to form a Greek government
continues. Efforts under PASOK have now ended: the baton is now taken up by
President Karolos Papoulias, who is set to begin talks with party leaders on
Sunday, extending into Monday.

In the meantime, the split between the
Democratic Left (DL) and SYRIZA has widened, with DL’s Fotis Kouvelis accusing
Alexis Tsipras of not being serious in his attempts to form a government. This
does give rise to hopes that in the next 2 days, a government between New
Democracy (ND), PASOK and DL can be formed, with the possible participation of
Independent Greeks (IG).

However, this is not a foregone conclusion.
Although Fotis Kouvelis has put forward relatively modest terms, it is not
certain that all his MPs will support the move. This means that in a coalition
government, unless DL party discipline is maintained for what promise to be
very difficult expenditure cuts, the coalition government may be short-lived. Kouvelis’
latest statement, that “Mr. Tsipras’ statements after the meeting of three
political leaders surpassed every limit of political misery” (Ο κ.
Τσίπρας στις δηλώσεις του μετά τη συνάντηση των τριών πολιτικών αρχηγών,
ξεπέρασε κάθε όριο πολιτικής αθλιότητας») is indicative of the
current climate between the two parties.

In the meantime, new polls give SYRIZA the
leading position in case of future elections, with different polls reporting
between 20-25% voter support. All other parties are ranked lower compared to
their previous voting results. This level of support would undoubtedly allow
SYRIZA to form a government, although it would need the support of one more
party, probably IG and/or DL, to have a majority in Parliament.

SYRIZA’s economic platform remains
undefined, but definitely open to interesting contributions from SYRIZA
leaders. Manolis Glezos today suggested that one way for Greece to survive
economically was for citizen loans. Citizens making below a certain annual
income—EUR 20,000—could volunteer to give a EUR 100/month loan to the
government. Citizens making above this amount would be obliged to give the
loan. While SYRIZA spokespeople hastened to add that this was a private opinion
only, it is a sure sign of the realism, or lack thereof, of SYRIZA’s economic policies.

I give a 55% chance for having a government
sworn in within the next 36 hours. This will cause DL and IG to “put up or shut
up.” There may also be movement among the Independent Greeks to join a
coalition government, although this prospect seems remote.

Failure to do so means elections by June 17th.
Should a second round of elections take place, several consequences can be
predicted absent a change in creditor policy:

· There will be large-scale bank
deposit withdrawals and an exacerbation of non-collection of taxes between now
and then.

· Greece will probably undergo a
second technical default, as it is unlikely that international creditors will
continue the bail-out programmes until a stable government is in place. At this
point, this doesn’t matter in terms of international refinancing, but we will
see a stop in payments to private sector creditors and probably salary or
pension payment delays.

· Upon taking power, SYRIZA will
lose another 2-3 months in fruitless negotiations with creditors. By September,
however, it is highly likely that a full default of Greece within the Eurozone
will take place, together with increasing policy measures described by SYRIZA,
including nationalisations, bank account seizures and other interventions.

· This in turn will prepare the
grounds for a Greek exit from the Eurozone, as a SYRIZA failure to comply with
the bail-out terms will result in its full isolation in European policy
circles. Although I still cannot see how this is legally possible, it will
likely be engineered by January 1st 2013. Should a Eurozone exit not
take place, Greece will implement a full default within the Eurozone, with all
this implies.

· Deposit flight, business
closure and migration will continue and accelerate in this scenario. Asset
prices in Greece will reach record lows as people liquidate at any price. Bank
capitalisation will take a major hit, resulting in the probably failure of at
least one bank.

· Political extremism may
increase, since SYRIZA’s tactics until now have included occupations and
physical attacks against public property and individuals (see their university record).
Should Chryssi Avgi remain in Parliament, it becomes extremely difficult to
track what will happen. One alternative is that both parties, having gained the
respectability of the public office, will stand down their more violent
supporters—many of whom have a long track record in street fighting against
each other. The history of Greece and any number of other countries, however,
indicates that the opposite may take place. In addition to violence between
different political groups, I expect increasing violence against journalists,
enterprise managers, bankers, certain university professors and other
figureheads to take place.

This total break-down in political order is
interpreted by some people as a “democratic choice”, and by others will define
as blind self-destructiveness. Although I had signalled something like this occurring in February, I did not think at the time that
(a) Antonis Samaras would so blindly press ahead with his demand for elections,
and (b) that this would occur so quickly, and to such a degree.

In any case, the choice is now crystal
clear. No voter, no resident, no worker, no business owner or entrepreneur can
pretend to be uninformed of their choices and the consequences thereof. Greece
has hit a new low in this past week, and unfortunately looks set to continue
its negative trend in the next months.

Tuesday, 8 May 2012

Greek politicians and journalists tend to
present a dichotomy of policy choices in terms of Greece’s future in the
Eurozone:

·
Continue austerity and remain
in the Eurozone

·
Unilateral cancellation of the
“Memorandum”, and Eurozone exit

In fact, this bilateral choice conceals the
likely course of events, which contains far more danger that what may be
apparent. I will try to describe how such a scenario would occur.

The scenario begins with either a voluntary
Greek repudiation of the lending agreement enshrined in the first and second
bail-outs, or a delay due to elections which leads to an equivalent situation.

This triggers an immediate response from
foreign creditors (private and sovereign), as follows:

· The International Monetary Fund
(IMF) ceases loan disbursements to Greece; Eurozone governments follow suit.
The immediate consequence is that Greece’s primary deficit, which in 2011 reached
EUR 7.7 billion (not counting interest payments of EUR 16 bln), must be
financed through domestic sources. On a cash flow basis, I estimate that Greece’s
primary deficit is much higher-probably at least 10-15% of GDP, or between EUR
20-30 bln.

· As a result, the government can
no longer pay pensions, government salaries, state hospital procurement or
other critical needs. Given that state worker compensation accounted for EUR
19.8 bln and social security costs were EUR 48.3 bln, we can assume that
approximately 30% of these payments will be in arrears. This means a delay of
at least 4 months in pensions and salaries, or a commensurate cut in payment
levels.

· However, this optimistic
scenario will be exacerbated by the fact that the government apparatus will
stop working, meaning that taxes will not be collected. Companies and
individuals will stop paying taxes, wages and suppliers due to the political
uncertainty.

· Greece’s private sector
creditors will immediately launch legal proceedings to recover their loans.
This will lead to yet further expenditure, but will also mean that Greek
companies will be cut off from international credit. Expect to see Greek government assets seized. This will exacerbate an
already uncontrolled crisis, particularly in areas such as agriculture and
tourism.

· In order to prevent a banking
panic, the government will have to freeze bank account deposits. This will
primarily affect the poorer, less-informed depositors: the more mobile,
well-informed companies and managers will already be informed in advance of
such a move, and will take steps to withdraw their deposits much earlier. This
means that a weekly withdrawal limit will be in effect, while international
transfers will probably be banned or subject to a large-scale withholding tax.

· Despite these efforts, the Greek
banking system will be faced by collapse in any case. Its operation today
depends on access to ECB credit lines and Bail-out II funds. Greek banks will
be cut off from both. They will be technically insolvent, and will have to be
nationalised and amalgamated. This will create significant popular and
political resistance.

· Foreign investment in Greece
will cease. Most companies will default on debt to suppliers. Many companies
will shutter or idle operations. Foreign tour operators will transfer bookings
to other sun-sea-sand destinations. Ferries and airlines will cease operations
because they won’t be able to cover their fuel costs. Imports to Greece will
only be sold on a cash-first basis.

· Greece will suffer
international outrage as the country that broke every single one of its
promises, causing a major loss of taxpayer money in other Eurozone countries.
The political consequences at the European level will be intense. Greek
politicians should not convince themselves that it will be business as usual.
Greek representatives will be excluded from meetings and decision-making. An
embargo similar to that which Austria faced over the Joerg Haider government
participation may be implemented. A freeze on EU structural funds will likely
occur.

These are the short-term impacts that will
occur within 2 weeks of an uncontrolled default. Depending on the political
situation, Greece’s next step may be to voluntarily withdraw from the Eurozone.
This will involve:

· A mandatory conversion of all
salaries and loans into a “New Drachma”, which will immediately lose between
35-40% of its value against the Euro and US Dollar.

· Bank nationalisation and strict
limits on hard currency deposits as well as withdrawals or foreign transfers.

· Inflation will shoot up between
25-30% in the best case within 1 month. Greece imports a large number of products,
ranging from food staples (meat, dairy products, vegetables) to fuel to
consumer durables and fast-moving consumer goods. These will continue to be
denominated in hard currency, while people will have to convert New Drachma at
a devalued exchange rate.

· All loans will be benchmarked
at a floating rate against the Euro. This means that as the New Drachma
devalues, families with mortgages or loans will have to pay increasingly more
of their salaries to service their loans, at the very time when inflation is
(a) making the loan appreciate at unprecedented rates, and (b) causing a
dramatic loss of purchasing power for basic household goods.

· As assets rapidly devalue,
desperate families will put property and other goods on the market at
dramatically reduced prices. This will lead to a downward spiral on asset
values that will take 2-3 years to work through.

· Unemployment will rise to over
35% as companies close, unable to cope with the new inflationary environment,
and unable to pay for inputs and working capital.

· The rate of business closures
will accelerate to depression-scale proportions.

· Mass migration will have to
occur, as younger people and others emigrate in search of stability elsewhere.

In fact, I consider a Eurozone exit
irrelevant. There is no benefit for either the Eurozone or Greece which could
not be achieved by alternative means. The idea of devaluing to regain
competitiveness will be far more painful that people imagine, particularly
given the problem of existing Euro-denominated loans. A Greek default within
the Eurozone is looking increasingly likely for this very reason.

However, having made one mistake of
historical proportions, there is absolutely nothing to say that a second
mistake will not be made.

Unfortunately, the first mistake alone will be sufficient to set off an economic firestorm of unprecedented dimensions
for Greece. No amount of political debate or advertising will be enough to
conceal this. Yet it is precisely this scenario which is now rapidly unfolding,
and may occur by June absent a firm decision on continuing the austerity
measures and the loan conditionality.

This evening, both the Communist Party of Greece (KKE) and New Democracy announced that a coalition government with SYRIZA was not foreseeable. New Democracy was outraged by SYRIZA's insistence that the leaders of ND and PASOK write a letter to the European partners "repenting" for their support of the Memorandum, and reneging on its terms. He was also understandably spooked by SYRIZA's intention to nationalise banks and other assets.

KKE's main political difference with SYRIZA is that KKE wants to leave not only the Eurozone, but also the European Union, whereas SYRIZA maintains that Greece will stay in the Eurozone and the European Union (although it does not establish how).

This means that barring a sudden change in policy until Wednesday afternoon, SYRIZA will not be able to form a stable government by Wednesday night. The maximum number of seats it can receive are 145, with 151 needed for a majority. The only way to avert this is if certain individual MPs from the other parties vote in favour, although the odds of this are slim.

Party

# Seats

New Democracy

108

SYRIZA + PASOK + IG + DL

145

Communist Party (KKE)

26

Golden Dawn

21

Total

300

The next politician to take up the responsibility for forming a government will be Evangelos Venizelos, head of PASOK, on Thursday. His most recent suggest is for an ecumenical government which would comprise PASOK, ND, SYRIZA and Democratic Left (DL). This is likely to be impossible.

However, it is likely that two electoral coalitions could emerge:

· PASOK, ND and Democratic Left 168

· PASOK, ND and 50% DL + Independent Greeks 175

The first coalition emerges if Fotis Kouvelis decides that Greece’s continuation in the Eurozone is of greater importance than another month of political instability and elections. The second coalition emerges if individual MPs from Democratic Left and Independent Greeks vote the same way. The first of these scenarios has been widely discussed.

In any case, it appears that the prospect of a Communist government in Greece is fading. Nothing will be certain, however, until tomorrow evening.

Should PASOK not be able to form a government, President Karolos Papoulias has the choice to try to form a unity government. Should this fail, then elections will be re-held in June. This delay in forming a government will be disastrous in terms of debt service, and raise the chance of Greece’s uncontrolled default within the Eurozone.

Antonis
Samaras of New Democracy was given a mandate to form a government yesterday, and after inconclusive
consultations with several parties, handed it back to the President of Greece.
The responsibility today goes to Alexis Tsipras of SYRIZA, raising the spectre of yet
another failure to form a government, and the instability that this brings.

In this
case, my opinion is that Samaras acted correctly. It is eminently clear that
neither SYRIZA nor the smaller parties have an actionable programme capable of
working within the constraints of Greece’s economic situation or the Troika’s
conditionality. The costs of trying to keep them in a governing coalition would
have created such tension that coalition failure would have been inevitable.

The
responsibility now goes to SYRIZA to translate its pre-election platform into a
workable governing coalition. To this end, both New Democracy and PASOK have
indicated that they will given conditional support, and PASOK has apparently volunteered
to enter a governing coalition. Smaller parties, such as Democratic Left and
Independent Greeks, have been preening themselves to join. In the meantime, the
message has also passed that “SYRIZA won the elections”, although in terms of
popular vote they remain the second party.

With this
in mind, I checked the SYRIZA website to see
if anything had changed in its economic policy platform. It’s worth looking at
some of these points to see how they stand up to reality.

A free
translation follows of some points. This is necessarily selective, and no doubt
I will be condemned for making a partial translation. There are several policy
points which are positive: necessarily, I will focus on those which I find
necessary to comment on given the limited time I have available for this post.

________________________

We commit, with the daily support and
activation of the people, to cancel the Memorandums, the loan agreements, the
monitoring mission from the European Union and the International Monetary Fund,
and to interrupt the catastrophic course which destroys society and has
pillaged the country.

They tell us that there aren’t enough
resources for a political change like the one we need. This is not true. In
Greece, everyone who works produces over EUR 200 billion. This is enjoyed by
the few. Resources can be found with a fundamental change of the tax system,
and the taxation, as needed, of large incomes and accumulated wealth, and with
the reduction of expenditure which does not serve the people’s interests.

·Change the tax system with an important increase of rates on large
incomes, to 75% on incomes over EUR 500,000 per year

·The tax rate of large companies should be increase to at least the
average in the Eurozone

·To implement a rate on financial transactions, and a special tax on
long-term and offensive consumption

·To end the special tax asylums on powerful interests, such as the
shipping sector and the Church

·To inventory the accumulated wealth, either in Greece or outside, and
adequate taxation of large fortunes above EUR 1 million

·To end banking and commercial confidentiality, so that there is
transparency in transactions and to battle against tax evasion and income
evasion

·To ban all transactions by off shore companies

·To transform and modernise the tax and auditing services of state

Additional resources can be found by the
effective utilisation of every European euro, not based only on absorption, but
on the multiplication effect of utility. With demanding the return of the
German occupation loan and reparations for the victims of the Occupation
(referring to World War II). With a review of all military expenditure and
ending all expenditure which is no necessary for the defence of the country,
starting with NATO expenditure.

Even
today, in the heart of the crisis, at the same time as they are cutting power
to poor families, they contribute to hiding income, exempting VAT income and
the income of insurance funds, and they do not collect taxes of past years, while
they don’t hesitate to reduce taxes (from 24% to 20%) on enterprise profits.

All
health services should grant medical, dental and ophthalmological care to
unemployed, homeless and low income retirees, without any cost or participation
by the patient.

To
increase and expand the unemployment benefit to all insured, and grant this
throughout the lifetime of the unemployment. To grant a special benefit to all
who have not been registered in the unemployment system.

To take immediate measures for the reduction
of prices of basic goods, with a commensurate reduction or, where needed,
elimination of VAT. To implement special price rates for services of common
benefits and vulnerable citizen groups. To immediately eliminate the tax on
small property.

The financial system can and must become
public and transform itself fundamentally into a new banking system, with a
democratic and transparent administration and management with the participation
and strong control of the working class. This is what we mean with the slogan “Nationalisation
– Socialisation of the Banks.”

A productive restructuring without public
investment and large public companies cannot be done. Large public enterprises and organisations
which have partially or totally been privatised (Public Power Company, National
Telecoms Organisation, National Railway Organisation, Post Office, National
Water Company, Transport means) must return to public control. Basic production
units which are critical for the development of the economy, such as ports,
airports, highways, shipyards, mines and energy wealth, must return to the
control and responsibility of the State.

The departure of Greek military forces from
missions with constitute interventions of imperialism in foreign territory,
especially Afghanistan and the Balkans. For the Greek Armed Forces, the
following principle must apply: No soldier outside the borders of Greece.

The condemnation of the military cooperation
with Israel and the end of all planning for military attacks on Iran and Syria.
The support for the creation of an independent Palestinian state on the 1967
borders.

The closure of all foreign bases in Greece.
Immediate closure of the bases of Suda and Actio. We don’t want Greece in NATO,
nor NATO in Greece, and we strive for its dissolution.

_______________

These are some of the main policy points of SYRIZA: there are many
more which I could not repeat here due to shortage of time. SYRIZA has received 1,061,158 votes in the national
election, coming in second, and gaining 52 seats of the 300 in Parliament. This
is also the party now charged with forming a government of national unity.

It should be clear that:

1.This policy platform is on the far left (not moderate left, as some have interpreted it) and,
given that it received approximately 10% of the votes of the population, and
17% of the electoral votes cast (taking into account a 35% abstention rate),
remains a minority. It is a mistake to assume that “SYRIZA won the elections”,
and that therefore the population is ready to accept this platform. It is
equally a mistake to assume that SYRIZA represents Greece or all the Greek
people.

2.Some of these goals (unlimited unemployment,
unlimited healthcare) sound extraordinarily attractive to a population which is being transformed into wage slavery by Troika policy and the domestic
banking system.

3.There appears to be no historical memory of
the past failures of nationalisation in Greece. While SYRIZA blames this on
“dikommatismo”, or the bipartisan rule of ND/PASOK, the fact is that corruption
and incompetence in the public (and private) sectors is indivisible of
political ideology, as seen from numerous examples in Greece and in world history.

4.Very few of these promises address the issue
of moral hazard of state dependency or state actors. Unlimited unemployment
benefits leads to legions of permanently unemployed. Nationalisation of state
assets in the Greek environment leads to poor public services and permanent
state employment. Unlimited educational benefits leads to legions of
badly-educated university graduates with no hope of employment in the real
economy.

5.Very few of these promises can be paid for in
a normal economy, let alone an economy in a depression which cannot afford to
pay for a public sector which takes over 50% of GDP.

6.This platform wilfully ignores the key
question of Greece’s responsibility to its Eurozone partners. It is impossible
to state that Greece should remain a European country while abrogating its
fundamental, state responsibilities to other European countries, and to other
European taxpayers.

I must also question the preparedness of some of the SYRIZA party
leaders to manage. Many party leaders have spent the
majority of their “careers” either as public university union activists or in
politics. I question to what extent they have actually worked in the real
world, and to what extent their ivory tower approach to social justice applies.

It is relatively easy to promise social justice using “Other People’s Money”,
yet the experience of equivalent organisations and cases the world over shows
that corruption, mismanagement, misspent funds and wishful thinking are not the
sole preserve of the “evil right”. I note that SYRIZA is definitely not alone in having leaders unprepared for public office by real economy experience, or by taking extraordinary liberties with OPM.

In Greece, Andreas Papandreou came to power in 1981 promising much
the same combination of policies: withdrawal from NATO, kick the US bases out
of Greece, nationalise what little private industry existed, “Tsovolas, give
everything”. The results were disastrous for Greece. SYRIZA will no doubt claim
this is due to corruption, and that corruption in SYRIZA does not exist because
SYRIZA is a “purer” expression of the people’s will. This remains to be seen,
but proving a negative of this sort in Greece does not inspire me with trust.

I agree with some of these points, such as the fact that there is
no reason at the present time for corporate income tax to fall from 24% to 20% while taxes on individuals are rising. There is a
definite need to reign in corrupt offshore company practises. I agree with the
identification of bipartisan corruption as a driver of failure in the Greek
public service. I agree with the fact that many of the measures adopted by the
Troika are unfair and will not lead to any results (and have blogged
extensively on all of these).

On the whole, however, I do not feel that SYRIZA’s platform is
well-suited to the world we live in. It relies on a romantic, naive notion of
the noble worker, and of an economy which can be regulated without reference to
ecommerce or globalisation. It assumes that granted unlimited state power,
state workers and functionaries will remain honest, efficient and idealistic.

It assumes that all state workers are angelic, while all private sector
managers are evil. It equates everything European or trans-Atlantic with
imperialism or financial subjugation. It ignores the stifling effect of government monopolies on entrepreneurship and innovation. It ignores the invisible handmaiden of a totalitarian economic policy, which is a totalitarian political culture and the secret police apparatus which accompanies it.

It assumes that sovereign obligations made by Greece only months
ago, which have been financed by the sovereign guarantees of other European countries,
can simply be eliminated without consequences, and disregarding the moral or
ethical foundations for doing so.

Should SYRIZA cobble together a government and actually try to
implement this platform, both it and the residents of Greece will receive an
important lesson in the boundaries of reality. Unfortunately, this lesson will
be accompanied by a total economic collapse, by massive investor flight from
Greece, and ultimately, by failure.

One would have hoped that left wing totalitarian solutions had
been discredited as much as uncontrolled, corrupt crony capitalism had been. Unfortunately, it seems that on both sides of the ideological divide, both voters and
politicians are bound to make the same mistakes year after year, generation
after generation.

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